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Fun money is a budget category that allows you to enjoy life while still working toward your financial goals. Also called “blow money” or “spending money,” this budget category lets you buy nonessential things without the guilt of ruining the family budget.
Including fun money in your budget is an essential part of actually sticking to a spending plan. You need some spending freedom to help you stay within the more strict limits of your budget – and that’s where fun money comes into play.
What is fun money?
Fun money is a budgeted amount that can be spent on anything you like… even things that aren’t usually part of your more frugal plan for debt freedom. Come to an agreement with your partner that the money can be spent on anything legal, with no questions asked.
For example, if your partner smokes, the cigarettes could come from their fun money budge. That assumes you’ve agreed to exclude cigarettes from your household budget.
It’s also important to keep the amount reasonable. “Reasonable” depends on your unique situation – income, monthly bills, debt payments, and discretionary spending.
If you only have $500 a month in discretionary funds, to cover entertainment, groceries, gas, and fun money, you shouldn’t budget $100 a month in fun money for each partner. $200 in fun money out of the $500 available doesn’t leave enough to cover everything else so that’s not a good choice.
What expenses are considered “fun money” depends on your situation too. The most important thing is to decide and stick to that decision. Fun money could include snacks, hobby expenses, books, date nights, alcohol, or eating out.
help staying within budget
Intentionally including funds to spend on frivolous things, like lattes or lunch out, will make the restrictions in other budget areas easier to live within.
You’ll be less tempted to blow your budget if you allow yourself to spend how you want within your fun money budget.
It’s almost impossible to live forever within strict budgetary limits, no matter how well-intentioned you start out. You will jump into budgeting with good intentions, with the idea that you can follow the limits you’ve placed.
It will feel possible to live without takeout all month or buying anything new for your hobbies. Your budget is bright and shiny new, you’re filled with hope.
But then, you’ll start living your budget. The habit of getting a latte on the way to work will be hard to break, especially if you never get a reward for your efforts. You’ll want to buy a new book or video game, but you didn’t budget for those expenses because everything extra is going toward debt payments.
And so, you’ll go over budget when you can no longer resist the temptation. You’ll buy that hobby item or order takeout, which throws off your whole budget. If you want to keep everything balanced, you’ll have to reallocate funds from other budget categories. That might mean you end up short on grocery or gas money, and have to make sacrifices later in the month.
It’s a whole snowball effect because you didn’t budget for fun money in the beginning. To avoid the budget-busting cascade, all you have to do is include fun money in your monthly budget.
How much to budget?
There are many factors to consider when deciding how much to budget for fun money:
- How much debt do you have to pay off still?
- How much are you contributing to retirement?
- Do you have an emergency fund saved up?
- What is your take-home pay?
Don’t budget so much that you can’t meet your other obligations. Budgeting less for fun money will force you to get creative and frugal with your optional purchases, to spread the funds further.
Budget 5% or less for total fun money if you:
- have debt to pay off (other than a mortgage)
- need to catch up on retirement savings, or
- do not have at least 6 months’ expenses saved in an emergency fund.
Once you’re financially secure, you can increase your fun money budget if you want to.
In my family, we budget about 4% of my husband’s take-home pay as fun money, then split that total between the two of us. He’s the breadwinner with a regular salary so I have transfers scheduled after each of his paydays.
We are still paying off debt now, and contributing quite a bit to retirement. After we are debt-free and have an emergency fund, we’ll probably increase our fun money. My husband loves to hunt and would like to invest in higher quality gear, so he’ll definitely approve of a bigger fun money allocation.
consider the 50/20/30 budgeting method
Although I don’t follow the 50/20/30 budgeting method myself, it is a nice, structured way to set up a budget and still have fun.
Broad budget categories are set up as a percentage of your after-tax pay:
- 50% for essential expenses (rent/mortgage, utilities, groceries, minimum loan payments)
- 20% for financial goals (retirement, investments, savings, additional debt payments)
- 30% for personal spending (eating out, travel, entertainment) and fun money
Incorporate fun money into your money plan
After each bi-weekly paycheck is deposited into our bank account, I use the Double Account Method. I have multiple transfers scheduled from our regular checking account to our “bills” checking account:
- ½ the month’s fun money to my fun money account
- ½ the month’s fun money to my husband’s fun money account
- ½ the total of a month’s bills
- Savings for annual expenses like propane, auto insurance, auto licensing, and annual vet appointments
You can learn more about the Double Account Method in the Bill-Balancing Bootcamp, but the basic idea is that you use 2 checking accounts to separate the money for your bills and the money for discretionary spending. The course is only $27 right now & it’ll help you get a handle on your monthly expenses!
To make things easier, we each have a separate checking account just for our fun money spending. I set the accounts up with Discover bank for two reasons
1. We already had a Discover credit card account, so it was easy to set up connected checking accounts
2. The accounts have no minimum balance or monthly fees since the balances could be pretty low sometimes
We each have a debit card for our account, which we use to make personal purchases. Interestingly, we use the accounts in the same general way. Although we both make some small snack or drink purchases, the accounts are mostly used to save for larger purchases.
We approach purchases on a case-by-case basis, but the general rule is “if it doesn’t benefit the whole family, it’s a fun money purchase.” My husband has used his fun money to buy a new hunting pack & I’ve used mine to buy an exercise bike.
Of course, we still buy gifts for each other from the family budget. We’ve been married long enough that we now just choose & order our own gifts; this has reduced gift-buying stress so much.
How do you actually do this?
Before COVID19, I stopped at a drive-through ATM while running errands every other week. I would withdraw our fun money & we would both use cash. This method required us both to carry cash around or stash it away somewhere if we wanted to save for a bigger purchase.
Using cash also meant we had to pay for online purchases with a joint card & deposit the cash to reimburse the joint account. Although that doesn’t require too many extra steps, it did add to the mental load of our personal bookkeeping. During busy or hectic times, things definitely fall through the cracks.
Once isolation made errands nearly obsolete and cash harder to spend, I switched our fun money system to individual checking accounts. The accounts are all connected, and we both have online access to everything, but I do 99.9% of all money-related tasks in our family. I have automated things as much as possible for simplicity, but my husband understands and is happy with our system.
I’m generally happy with the setup, but it does take a few days for a transfer from Wells Fargo to show up in the Discover checking accounts. It’s a small annoyance but still a consideration.
When to use separate accounts for fun money
Separating the fun money makes it easier to keep track of what each partner has saved & spent. You could absolutely combine the funds, but that muddies the waters.
You obviously don’t need to go through the effort of setting up separate checking accounts with separate debit cards, but it does help. Keeping the fun money separate is just cleaner and easier.
The decision is completely up to you, but I recommend using separate accounts or cash.
Fun money can improve your relationship
A big part of setting up a fun money budget is coming to an agreement with your partner about how it can be spent. I’d recommend not asking about or paying attention to what your partner is spending money on, as long as they are sticking to the fun money budget.
Having separate funds & healthy boundaries will reduce relationship tension over money. Trust me, I would normally be annoyed by how much my husband wants to spend on hunting stuff. It always seems excessive to me. I spend more than I’d like to admit on drive-through caffeinated drinks.
Separate fun money allows us both to spend on what’s important to each of us, even if the other doesn’t value it. We don’t disagree about those purchases anymore (OK… I don’t get mad at him for wasting budgeted money on silly things).
Should it be equal?
Once again, deciding whether your fun money should be equal for both partners depends on your family. In my household, we both get the same amount, because that’s what we agreed upon.
It could make sense to have different amounts. Maybe one partner spends more time driving & likes to buy lunch on the go. A stay-at-home mom might need more fun money to cover random activity costs. A smoker would spend more than a non-smoker.
Open communication is key here. Discuss what is considered fun money, what is not, and how much you each expect to spend. Agree on each partner’s fun money budget.
You can always adjust the amount you each receive. I recommend having a budget discussion at least every month – or even weekly, especially when you’re new to budgeting. For your first attempt, pick a fun money number and see how it goes.
Remember that fun money helps you limit impulse buys, overspending, and additional credit card debt. Fun money is a control method that still allows for freedom to spend on what makes you happy.